Skip to main content

tv   Squawk on the Street  CNBC  March 15, 2010 9:00am-11:00am EDT

9:00 am
the street." good morning, everybody. i'm mark haines. >> and i'm erin burnett. and front and center on a monday morning, senator dodd's financial regulation bill. it's going to move forward this week. it's going to be introduced with great fanfare and announcements today. and the big question is, what is actually in it and what got cut? >> i'll bet you i know who knows what's in it. >> mm-hmm. >> house democrats admit they are still short of the 216 votes needed for health care reform, but democratic leaders remain confident they will have the votes when the time comes. and citigroup this morning upgrading walmart, the largest non-government employer in the united states. citi upping walmart to a buy from a hold. mark? >> here's a look at where walmart shares are in the premarket. well, no, actually. here's a look at the futures. it's monday morning and they're throwing us curves already.
9:01 am
down 2.70. we get a little bit of a break here because we close 1.31 above fair value, so, maybe a loss of 10 at the open on the dow? >> all right, well, senator christopher dodd's going to be unveiling that financial reform package, as we mentioned. key issue for wall street and for washington, and everyone wants to know exactly what's in it. now, when you talk about health care and what's in it, it's really almost impossible to ascertain, but when you talk about financial reform, you've got steve liesman, and that means we know exactly what's in and what got cut. steve. >> well, not exactly, but more or less, erin. i just want to downplay expectations a bit. there are areas of both consensus and controversy in this bill. the person familiar with the talks telling cnbc that late last night, senators dodd and warner and corker hashed out two important sections of the bill, but others dodd clearly chooses in the bill, that he'll release at 2:00 today, to secure democratic votes on his left rather than republican votes, leaving that process for later. as we reported friday, here are
9:02 am
the key parts of dodd's bill. it will have consumer protection. we'll talk more about that in a second. resolution authority that we understand may actually be called now after corker's urging orderly liquidation so it's clear to the big institutions what it's about. a systemic risk council. derivative regulation. however, reid and gregor still working on a democratic compromise. dodd is saying he'll accept that work if he approves it. one key issue illustrates the balance going on here, consumer protection. corker and dodd struck a deal where consumer protection agency would be housed inside the federal reserve. it would have separate rule-making authority but leave enforcement up to the banking supervisors. not in dodd's bill. sources tell cnbc dodd's bill will give the consumer protection agency some enforcement authority and let state attorneys general enforce consumer protection. that's a deal-killer for republicans. people familiar with the matter, however, tell cnbc all of this is negotiable either in committee or on the senate floor if the republicans can bring some votes to the table. the fed, the big loser in dodd's
9:03 am
original bill back in november, now a big winner. it will be tasked with supervising financial companies, that's bank and thrift holding companies with more than $150 billion in assets, along with other companies that could eventually be deemed systemically important. one big area of change -- in an attempt to clip the wings of the new york federal reserve bank and limit the influence of the banks themselves on the board, sources say the new york fed president will be chosen by the president of the united states, not the new york fed's board of directors. the bill also includes an amendment championed by democratic senator from new york chuck schumer to give shareholders more say over executive pay. so, mark and erin, there's stuff in here that's going to secure the left and eventually negotiate with the republicans. we'll get the bill at 2:00 this afternoon. mark? >> the new york fed president will be chosen by the president. >> of the united states, yeah. >> what about the other fed presidents? >> my understanding is that they would still be chosen by their local boards of directors. >> why are they singling out new york? >> because the new york fed president has a special place in the federal reserve system.
9:04 am
the new york fed president is the vice chairman of the federal open market committee and always has a vote. he also regulates and supervises the big banks, and the question is whether or not there's a little, what they call in the business, mark, regulatory capture for the new york fed president. >> all right. thank you, steve liesman. >> sure. >> let's hit the markets. bob pisani at his post. good morning, bob. >> good morning, mark. very good news here on credit trends. capital one reporting credit card delinquency trends down, also net charge-offs also down, in fact, more than expected. a couple analyst firms actually raised estimates for the quarter on that news here. a monday deal -- phillips-van heusen announced they're acquiring tommy hilfiger. that's from apax partners. phillips-van heusen itself has a market cap of only about $2.4 billion. they say the bill will be accretive to earnings later this year. boston scientific down about 17% on a bernstein research report that they are suspending all sales of their icd,
9:05 am
defibrillator devices indefinitely due to manufacturer errors related to the manufacturing process. the stock is down notably on that. more next half hour. pepsico up 1%. you know the trend -- raise your dividend and announce a bigger buyback. a number of companies have done that this year. scott, how are we looking at the nasdaq? >> we could open lower. google and china continue to spur over censorship. those shares are in focus. and baidu shares are up 4%, 5%. research in motion is up a fraction. most big-cap technology stocks mixed this morning. but the look on research in motion is that morgan stanley has raised estimates further above consensus there, partly on the belief that verizon will not start selling the iphone from apple in 2010. millicom, micc ticker symbol there, upgraded to overweight. athey areos communications was
9:06 am
downgraded at barclays capital. and watch amylin and alkermes. both stocks are up. byetta drug reaction. it rejects immediate approval but does not call for more criminal trials and that's key to why the stocks are up. let's go back to erin. >> thanks very much. known as the judge to mr. haines. in asian markets, higher, eking out a gain of 0.01%. europe also mixed, and the thing that's up is not even hitting the percent charts. the ftse and the cac are lower and louisa bojesen has more. >> hi, erin. scott was talking about the defenses of the health care sector and a couple gainers there. we're seeing the same in europe where defenses are being in favor today, if anything. very flattish markets, quite flattish on news flow. the ftse, the cac both in slight negative territory, as you're
9:07 am
seeing. being pulled down by some of the big banks, for example in spain, hsbc, on worries, among other things, over the u.s. banking reform plans and how they will play out. there are also still some nerves regarding a potential chinese tightening and what that could do as they continue to fight inflation in china, and that's having an impact, too. i was just checking out some of the other main stories making headlines, and one of them, of course, being the finance ministers of all the countries that use the euro here in europe, they're meeting today and they're hoping to hammer out how the aid plans to greece could potentially look, despite the fact in you're having doubts from germany and france whether or not this will happen, but that's a huge talking point here in europe. let me just show you the sectors and what we're looking at. the sector losers, basic resources and insurance are pulling us down by the most, basic resources off 1.6%. health care, as i was saying, a little bit of respite there followed by utilities and technology. but flattish markets in general. erin? >> thank you very much, louisa. we appreciate it. and now he wants to come on
9:08 am
early today. he doesn't mind that there is no water in englewood cliffs, there's no toilets flushing. he's there. >> there's only one thing i mind that there's none of, erin, there's no coffee. >> oh! >> yeah. >> that's terrible. >> you'd think they might have called ahead, called dunkin' donuts, get them to send over from kind of vat, something. >> you would think. >> no, no. >> no. >> for some reason. rough night last night, too, i don't know why, sleeping, maybe the clocks, i guess. let's get to m&a news, a few deals we're following. one new deal to tell you about at the end -- let's start off with osu pharmaceuticals. you may remember a couple weeks back japan's astellas came with an aggressive bid, $52 a share in cash. but beyond that, also clearly going to challenge the board of directors in toto come after them. there were no real defenses there, so astellas had the ability to throw that entire board out, and in fact, i believe maybe as soon as tomorrow they actually file their slate. but this morning, osi comes out,
9:09 am
not only rejects them in their d-9, but also basically says we're for sale. and so, that will have an effect of blunting anything that astellas is trying to do in terms of throwing out the board, because osi at this point is saying we're looking for buyers. come and get us if you want us, but we obviously do not believe $52 a share in cash is the appropriate price. the unanimous rejection of that unsolicited tender offer, and again, of course, so therefore, they're telling you not to do anything with it. osi pharma, the way they're going to position the company in terms of trying to get the higher price and make the case is fairly straight-forward. they're going to say, hey, we're the last mid-cap oncology-focused company that's profitable in biotech. you know, you're talking that nice sweet spot of between maybe $3 billion and $5 billion and overall market cap where there are a lot of deals getting done even to this day. and they also will say, hey, we've got $500 million in cash, we've got a net operating
9:10 am
loss -- we've got a tax benefit from a net operating loss. you throw that together with royalties on a diabetes drug, that's worth $800 million. so, $500 million in cash, $800 million in the royalties and the nol. you're talking $1.3 billion in value there. and of course, you see that osi is trading well above the initial bid. remember, in the background that we already got, we found out that astellas had at one point at least given voice to the idea of paying as much as $57 a share. the stock well above that $52. the question is, who comes, if anyone else? in this sweet spot, so to speak, you might see some other participants, and keep in mind, some deals of similar size that we've seen in the past, or at least in that smaller mid cap range, accesepricore, for examp got sold. and this would have seemed to be perhaps the expected buyer, given that they were partnered
9:11 am
already on some drugs, ended up being gilead, inclone. you thought bristol, ended up being lily, so, we have seen a number of times where a company, such as an osi, gets an overture, puts itself up for sale and you end up with a higher price being paid. the most recent, of course, being facet biotech where abbott came in at $27 a share after biogen got rejected at $17.50. we'll see where it goes from here in terms of osi and astellas. again, astellas is expected to file that slate probably as soon as tomorrow. other deals to tell you about this morning, not really much to add on psychiatric solutions other than to say that people close to the deal simply indicating to me that it's going to be a while. you know, we learned on march 10th they hired goldman sachs, they formed a special committee. remember the "journal" having reported they were close to a deal with bane. well, from what i'm hearing, there is no expectation of any near-term deal. everybody yelling and screaming
9:12 am
about nothing's even close to imminent. we're just getting started. we'll see. we'll see how long it takes. of course, the company, as i said last week, did come out and said we got approached by a third party and we've also already hired goldman sachs. we formed a special committee, because management might have been a part of that potential buyout. so, they're out there as well. we'll get back to a bigger deal this morning in the energy industry, cnx buying some assets from dominion resources, particularly the marcellus shale, a $3.4 billion deal. we'll probably get a check on both those stocks later. for now, back to you, mark. >> thank you very much, david faber. up next, a check on commodities, the bond markets and the word on the street. and senator dodd pushing his financial reform plan forward. is his plan to boost oversight in the industry going to influence the way you invest? that's actually is the big question. everyone says, so, what does wall street think of his bill? is anyone going to change anything because of it?
9:13 am
let us know what you think, yes or no. vote on our site. and on "power lunch," best-selling author, newly minted mogul and financial writing guru michael lewis talking about his new book "the big short," coming up on "power lunch" today.
9:14 am
9:15 am
and as we count you down to the opening bell, here is a look at futures. these are the minis trading -- they trade right up until the
9:16 am
bell. and barely, barely, barely, barely lower, perhaps, at the open, which means it could go either way. obviously, a lot of it will have to do with what happens with financial reform this afternoon at 2:00 p.m. eastern. let's look at energy and sharon epperson is at the nymex with that trade. not seeing a whole lot of move for stocks, but we are in energy today. >> definitely. we're seeing a big move lower here, down about $1 for crude prices, still above $80 a barrel. and that slight move in february, industrial production here in the u.s., didn't seem to move oil prices much off of the lows that we're seeing. in fact, we're near the overnight low right now. there are a couple of factors that oil traders will be watching this week. of course, as always, watching china very carefully and the tightening policy there, what is going to happen perhaps with the bank credit rate decision. also watching what happens with the federal reserve and likely to leave rates unchanged, but what is discussed in that meeting will be very important, the commentary there. and of course, the opec meeting on wednesday. there's also not a lot of expectation for a change in the
9:17 am
quotas there, but we will be watching that opec meeting in indiana as well. meanwhile, we're looking at many oil producers continuing to increase production. we have cnooc raising production by buying the argentine bridas corporation, shell boosting production, opec raising the number. we look at oil prices right around $80 a barrel. rick, over to you in chicago. >> thank you, sharon. we've had a decent amount of data, some very fresh data, the march empire might have come in as expected, but it was down from the look in february. january treasury international capital flows, this is a must-observe, and i need to comb through it more, but the net total flows were down about $33.5 billion. last month's was slightly revised lower. this is something to pay attention to. it's always two months in arrears. we just had february industrial production up 0.1%, capacity yut
9:18 am
at 72.7. you could say both were within the realm of expectations, only subtle revisions. and in terms of supply, we always have to pay attention to supply. this is the week where it's pretty much just bills, bills to pay bills. we have three in six-month, four-week bills tomorrow and on wednesday, those 56-day supplemental replenishing bills. mark haines, back to you. >> santelli, thank you very much, sir. i'm on the floor with art cashin from ubs. good morning, art, how are you? >> good morning, mark. how are you? >> oh, i'm pretty good. >> good. >> let's talk about this market. we're up close to the top of the range, only about 100 from the 52-week high for the dow, but where is all the volume going? >> well, that seems to be it. i think there's a great debate going on. the bulls came in friday morning. they had already ordered the champagne it was on ice in the locker room. and yet, they couldn't push the s&p significantly up through that 1,150, and i think it's kind of an indecisiveness.
9:19 am
no new money is going into stock mutual funds. part of the rather is short covering. the other part is money managers in those funds eating up their own cash, and the cash levels are at some of the lowest we've seen in a long time. so, we need some new fuel to get both the volume and the push go through. >> are you optimistic or pessimistic? >> i'm caught in the middle. i'm waiting for the play to come out. this is an alfred hitchcock. we're right up to the important moment now. we'll find out if the killer gets in or if the hero escapes. >> all right. art cashin, thank you very much, sir. let's go back upstairs to erin. >> all right, mr. haines. and we will take a very brief break. we've got the buzz from beyond the big board on the other side of it, and this big financial regulation news coming out today, what it's going to mean for the financials. should you be investing in banks or not? plus, a prebuttal. republican senator richard shelby is going to join us to talk about the gop's point of view on the dodd proposal and
9:20 am
whether republicans will get on board. this is "squawk on the street." we'll be back.
9:21 am
9:22 am
as promised, time for the buzz from beyond this board. dave ravelie is with u.s. equity trading at canaccord adams. what are you looking at today? obviously, we've got this financial reform bill, got some walls on walmart. what's the headline that matters most to you? >> the headline i'm at most is are anymore trees going to fall down on my block, actually, but
9:23 am
besides that, i'm looking at the federal reform bill, seeing what dodd's going to put in it. i'd like to see the disclosures on that. i'd also like to see what's going to happen -- i know you talk about it all the time, this robin hood tax, because believe it or not, this will cripple the market. i could go into heavy detail. i know we only have a few minutes on this, but i'm telling you, liquidity would dry up, you'd be paying a lot higher for your stock prices. >> this is a tax on every sort of transaction that could go up to 0.25%, right, the robin hood tax? >> yeah. look at it like this, erin, if you were to buy google at $581, it would cost you another $1.48. i don't know how many day traders are going to pay up $1.50 to buy a stock. think of the liquidity that's going to take out of the marketplace. >> so, you're very worried about that. and your perception is they may try to squeeze that in, even if it's not in the bill today, that could throw it in at the last second or through any other legislation going through, frankly. >> exactly. and think about if it's a $10 stock. it would cost another 2 1/2
9:24 am
pennies. wasn't the whole reason we went to decimalization to get the mom-and-pop investor a penny better? 12 cents, they pay a penny. now you're going to charge them 2 1/2 cents on top of the spread it doesn't make any sense. >> okay -- >> and don't penalize the medium and small firms that had nothing to do with t.a.r.p. because you want to get back at the big banks on wall street. >> all right, david rovellie, thank you very much. we appreciate it. and dave raising an issue, by the way, for those of you who don't know -- a lot of traders are very, very passionate about this issue, and there are two sides to it, like there are to almost everything. not everything. sometimes there really aren't, but in this case, there are. but they are passionate. traders are. >> you found some people who like a new tax? >> yes, because they say it would not impact at all regular people who do not have a 401(k), a pension, whatever, they're not trading in and out, so it actually would not hit those folks. >> yeah, i don't care, because it's only going to hit bank sharers, people who are going in
9:25 am
and out drk. >> unless the big funds were doing trading over here decided to take the charges they're incurring and apply them to the pensions over here. >> well, yeah, that's true. >> but i don't know, yeah. >> anyway, final countdown to the opening bell, coming right up. and a check on market technicals. details on what could make or break the current rally, especially given we're right at a crucial technicalley.
9:26 am
9:27 am
9:28 am
let's get more on the markets before the bell. joining us from the cme, jeff carter of good morning to you, jeff. >> how are you doing? >> here we are, beginning of a new week, lots of technicals everybody's looking at, lots of talk everyone's looking at when it comes to washington and financial reform. what's your focus? >> well, unfortunately, you guys are doing far too much reporting on washington. that really bores us traders and we're a little sick of it. we'd like to see government get out of the way, especially with the tax that you talked about in
9:29 am
the last issue. i think that technically, the market's probably going to open a little softer, might go a little lower, but i think there's buyers about. i think you'll see a continuation of the low buyer rally that we've had. eventually, though, these cash guys have to buy this market and i don't know at what level they do, but we've had a nice low-volume rally here, and that's going to kind of look a little bit scary to those guys. >> all right. well, thank you very much. we appreciate it. >> take care. >> here we go with the opening bells! at the big board, cbs sports network. >> i was wondering what those things were. >> celebrating march madness. at the nasdaq, the movie "truly e indy" -- >> look at that guy in the middle! did you see that? that was almost a hand dance. >> i can't get the name of this movie. >> syracuse has the number one
9:30 am
seed. >> yeah, i know, syracuse is one of the number one seeds, so hand is all excited. >> hand is our producer down here, and yes, he is the creator of the aforementioned hand dance. our market reporters are standing by at all of the markets, and let's begin with bob pisani here with us. bob, we're down in unlucky 13. >> and a little bit of weakness, down about 1.3 points in china on concerns of a little bit of a flap on the currency issue and also some concerns about maybe higher interest rates in china. but generally good news in the united states. credit card delinquency trends were improving at credit capital. i think you'll see that at the other issuers as well. not just in the charge-offs, but the delinquencies has improved notably, in fact, better than people expected. couple interesting deals this morning here. we've got dominion's appalachian e&p business will be bought for $3.5 billion. conspiraol energy's going to ace that. and phillips-van heusen
9:31 am
announcing it's going to buy tommy hilfiger. that's about $3 billion from apex partners. the total value currently $2.4 billion, so a good acquisition for them. they say the deal would be accretive later this year. boston scientific one of the big losers, down about 17% on a note from bernstein research saying they're going to be suspending all sales of their icds -- these are a brand of defibrillators -- indefinitely due to an fda review of documentation errors related to the whole manufacturing process. still not confirmed by the company, but that's affecting the stock. finally, pepsi becomes the 71st company to raise their dividend in the s&p 500 this year. they're also announcing a major buyback program. how's the nasdaq? >> we're hoping to touch lower, a modest decline of 0.3%, just about eight points, and that's what you're seeing across the board from the large cap and technology stocks. modest losses from intel, microsoft, cisco, dell. one of the interesting stories
9:32 am
is coming from google, down 2% as it continues to spar with china over censorship. then they added speculation that google could walk from china there. again, those shares open lower. flip side of that, of course, is baidu reaping the benefits of that story. those shares are up 3%. baidu is the chinese version of google. so, there you see the story. research in motion is up 1%. the estimates raised further above consensus at morgan stanley, partly on the belief that verizon will not start selling apple's iphone in 2010. micc, that's the company called millicom, it was upgraded over at hsbc. atheros communications is down about 3.5%. the story there, downgraded at barclays capital. keep an eye on the biotechs, amylin pharmaceuticals and akermes. amylin is up 10% and akermes is up sharply as well as the fda is responding to the diabetes drug the company is developing. no more further clinical trials. that's the headline and the reason the stocks are higher. let's go to sharon at the nymex. >> oil prices are down about 90 cents in london and here in new york, but in new york we're
9:33 am
still above $80 a barrel, holding firmly there, even with that 90-cent drop. keep in mind as well, as we look at the strength in the dollar today, some traders may be saying that that is what is causing the weakness that we're seeing in oil prices, but when you look at what has happened to the dollar versus the euro in the past month, the dollar's actually down about 1% while crude prices have rallied above 3% since march 1st. so, we are looking here at the crude prices continuing to rally, even with somewhat strengthening dollar. keep in mind as well when you look at natural gas prices what is happening in terms of production and new plays and shale plays in particular. we had the marcellus shale in particular really helping to increase the production there and also helping to lower some of the natural gas prices, according to a lot of the traders we're talking to. rick santelli, to you in chicago. >> well, thank you, sharon. interest rates virtually unchanged to just a little bit higher. and this, of course, seems pretty counterintuitive to one of the several stories of the day, and that, of course, is
9:34 am
maybe another warning shot by moody's regarding sovereign ratings. those sovereigns with aaas, most specifically maybe the u.s. and uk? nobody's arguing in the foreseeable future, nothing's going to change. they're the deepest credits. but some of the wording that the distance between today and at some point in the future a potential downgrade, that distance is shortening, and that's what traders were looking at. the dollar doing better, particularly against the pound. mark haines, back to you. >> thank you, rick santelli. quick check on the markets for you now. as expected, the dow opened down just a bit, 13 points. we can get that back in an eyelash or an eye blink. the nasdaq composite's down 8 and change, s&p's down 3.25. your "cnbc edge" now with doug kahlig yacht and jim hardesty, president of hardesty capital management. jim, i'll start with you. we got back to the top of the
9:35 am
range, we've stalled on low volume. what's going on? >> well, we are seeing an economy that's recovering, which is good news, and i think we're seeing a market that's valuation is not fully reflecting the potential earnings in 2011, which i think says that this is just a brief hiatus and we're going higher. >> doug cliggott, do you think this is just a brief pause? >> i'm not sure, mark. we see positives and negatives. in our view, very strong earnings are really priced into the market with the s&p around, you know, 1,150. you know, the way we're looking at things, the only real new money coming into the market right now is corporate money, a lot of m&a activity, and so, that's a theme we're focused on, and that gives some investment opportunity in two sectors particularly. we like the exploration and
9:36 am
production companies within energy and we like biotech within health care. we see these segments as really being targets of the much larger companies in the respected sectors. >> let me -- i want to follow up with each of you, but jim, first to you. you say you're looking for 12,000 on the dow by the end of the year, so that means we're three years after the peak of, what was it, 1,464 or something, and we're still not there. when are we going to be back to dow 14,000, soon or are we in a situation like the nasdaq where it hit that peak in march of 2000 and who knows if we will ever get back there? >> well, no, we're nowhere near in the situation of nasdaq. what we do have is, i think a bigger risk premium that's been brought on by the traumatic events of 2008. it's going to take some time, but i should think by 2012 we will easily have penetrated the old high of 14,164. the earnings numbers are good,
9:37 am
the inflation outlook is reasonably good for the next couple of years. so, i think we're in good shape. >> jim, does it bother you at all that in the rebound we've had recently, it's the lesser quality stocks that are leading the way? >> well, i think that gives us potential for the future, yes. i think that it's somewhat surprising, but there's been a great deal of skepticism on the large-scale stocks, but as their earnings develop, it's going to be a very positive for the market going forward. >> okay, gents, thank you very much for your input. appreciate it. >> thank you. next, we're going to talk with two top technical analysts about where the recovery rally might be headed. >> and later, republican senator richard shelby joins us live to discuss the dodd financial regulation bill. we're going to go through it with each of the key points and see senator shelby's reaction, our gauge. if you can get bipartisan support there, mark, you can get it anywhere.
9:38 am
let us know on our street poll. if the financial regulatory reform bill, whatever the heck it ends up being, will change the way you invest in any way. yes or no. this is onstar reporting a stolen blue chevy tahoe, south on i-75, near exit 5. we're on it. onstar, we may have that tahoe. ok, i'll flash the lights. we got it. it's in the clear. i'm sending a signal to cut the power. we got him. mr. ross, the police have recovered your tahoe.
9:39 am
anncr vo: can get help gwith a flat tire.... anncr vo: ...find a nearby tow truck or gas station... anncr vo: emergency services... anncr vo: ...collect accident information. anncr vo: or just watch some fun videos. anncr vo: it's so easy, a caveman can do it. caveman: unbelievable... caveman: where's my coat? it was suede with the fringe. vo: download the glovebox app free at
9:40 am
9:41 am
commodities corner with a check on gold. gold on the rise this morning. concerns over debt ratings for some of the biggest and most developed countries in the world. not much of a move for gold, but moody's report also getting some attention, which says the credit ratings of four of the world's biggest aaa debt issuers, which means the most stable in the world -- america, britain, france and germany are safe, but risks to their "blue chip
9:42 am
status" have grown. gold is trading higher. mark, the one thing i will say, and i mean this in nothing about the ratings agencies other than the facts -- the ratings agencies, their downgrade will not be what causes the problem. the market will already have well identified which of those economies, if any, are going to have massive crisis before you get the downgrade. >> yeah, the market's usually ahead of everybody. so, the government and toyota raising new questions this morning about the supposed runaway prius incident in southern california a few days ago. some things just don't add up here. cnbc auto reporter phil "four on the floor" lebeau has the latest. >> there was a gentleman in southern california who said, hey, he could not stop his prius for more than 30 miles, and at the end of the situation, they said, well, let's take a look at the car. and here's what nhtsa investigators found when they did look at the car. essentially, they couldn't duplicate his complaints. they wrote "we have not been
9:43 am
able to find anything to explain the incident." they further go on to say "the system on mr. sikes' prius --" james sikes being the man who owned the prius -- "worked during our engineers' test drive." they took off the brakes and accelerator pedal and looked at everything inside the car, and what they found is that the engine shut down as planned when you are accelerating and then you hit the brake. that's what the prius is supposed to do. this analysis casts doubt on the runaway prius claim by james sikes. his attorney says he's not in this for fame or fortune. this is what happened to this gentleman. he has no plans to sue toyota. don't call this a hoax. well, he may not be calling it a hoax, but there are certainly a lot of questions out there. toyota will have its own analysis explained this afternoon, 3:30 eastern time is when toyota officials will talk about the results they've received from looking at the car over the last week. as you take a look at shares of toyota, keep in mind, this stock really hasn't moved based on these stories that have come out
9:44 am
in the last week about runaway priuses or runaway other toyota vehicles. what is impacting this stock, the fact that there are reports out of japan that toyota may be cutting its prius production by 10%. david faber, i know you've got more on a different story. we'll send it back to you. >> phil, actually, i want to ask you a question quickly on this. i know there's been research to support the idea that sometimes people are simply pressing on the gas. >> correct. >> particularly in a certain age group, i guess, above 55 or 60 years old, is that correct? >> older drivers, that is correct. if you look at unintended acceleration cases, not just for toyota, but for the entire industry over the last 30 years, many can be explained as driver error with older drivers. they hit the gas instead of the brake or the vehicle lunges, at least that's the feeling that they have, and then they get a little panicky and perhaps that's what causes the incident. >> yeah. how old was mr. sikes -- is mr. sikes, do we know? >> he is 61. >> 61. >> he is 61. >> thanks, phil. >> okay. >> all right, thanks very much to phil lebeau. by the way, we had a professor
9:45 am
on, mark -- >> where was faber going? david, are you still there? >> yeah, i'm here. >> what's the significance of his age? >> oh, well, because there has been studies -- and phil was saying -- that show that -- and i don't know, somehow, maybe, perhaps the brain works a little differently after a certain age, that in a preponderance of cases, where people were actually just hitting the accelerator, they tended to be over 60. >> well, mark, you know, yes, that that showed also with the audi situation in the '80s. >> really? >> it was exactly the same set of results. >> really? >> yes. >> really? >> yes. >> now, i wouldn't -- >> and the other ones -- >> really? >> mark, we're not making a comment on your driving skills. >> i find this -- >> mark -- >> you know, mark, it never would occur to me that you would be part of that crowd. >> no. >> i mean, i think of you as so youthful. >> mark hits the accelerator -- >> oh, nice try. >> hey, i'll be there soon myself at this rate, so. >> all right. phil and david, thank you both very much.
9:46 am
>> it's interesting, the study, actually, we had the professor on last week who had advised audi in the '80s and now was looking into this, not advising toyota, that it is often driver error, even when it's not age. people tend to do the wrong thing. >> yes. >> they don't turn the ignition off. they sometimes hit one pedal instead of another. but one of the reasons they point to older drivers as an issue is some of them learn to drive with two feet, and now, obviously, that is not how people are taught. so, i am not saying everyone over 60, but that was one of the reasons that they pointed on older drivers as somehow hitting the wrong pedal. >> yeah, i think we need -- i don't know. >> but you have according -- >> i could see if you were talking about people over 80, then i would say, okay, you've got a point. i know a lot of people in their 60s and 70s who are just fine. >> right. yes, fair point. >> and are not going to confuse the pedals. anyway. >> by the way, the takeaway from the study was you had a greater chance of being struck by lightning or dying randomly walking two blocks on any street in america than you do being involved in a sudden acceleration accident.
9:47 am
>> yeah. i understand. >> and that psychology plays a big role in why all of a sudden all these reports are coming out now of more issues. at any rate, coming up, the dodd plan, how it will affect financial stocks, the bigs and the littles. >> but first, low volume, low volatility, enabling risky stocks to rally. we'll check on market technicals. what it is they're signaling about and which stocks are ready to break out. and on "power lunch," pga tour commissioner tim finchem, the return of tiger, the health of the tour without him and a whole lot more. that's at 1:30 eastern time on "power lunch" today.
9:48 am
9:49 am
9:50 am
in this morning's "street cap," citigroup upgrading walmart from a buy to a hold. stock up 1%. senator dodd will unveil what could be landmark legislation to overhaul the financial system today. contents of the bill due out this afternoon. it will include changes for consumer protection, resolution authority, systemic risk,
9:51 am
derivatives and beyond. in the next half hour, we'll talk to senator richard shelby, ranking republican on the bank committee, get his thoughts on the matter. "alice in wonderland" took in $430 million at the box office this weekend. walt disney the distributor, tim burton the director. i'm brian shactman here with your "realtime flash." i want to drill into walmart a little bit more. it's the best performer in the dow today. you see the upgrade from buy to hold at citi. the price target $65, eps raised to $4.04 from $4, but the interesting part is the outlook for comps. 1.9% up from 1.3%. that's pretty dramatic for a company that, of course, gains market share, but that's a pretty big pop, the call from the folks at citi. also, somebody pretty bullish on housing, at least one particular stock in that space. citi also initiating beazer with
9:52 am
a buy rating and a price target of $6.25. the stock up on the call. it's interesting with last week, you may recall, ubs cautious on the entire sector of homebuilders. and a lot going on with st. jude medical today, up more than 7% or just about 6.33%. the defibrillator sales being stopped, also a marketing agreement with seemens and a nice pop on that stock this morning. er erin, back to you. >> thank you very much. so, we've got low volume, low volatility and people get nervous when that happens in the markets. but nonetheless, they still have reached a one-year high, led recently by some of the higher risk stocks, helped by everyone putting money back into risk, and you can see that in a low volatility. so, what do the technicals say about where we're heading right now? katie stockton joins us. she is with mkm partners and carter werth. we appreciate having both of you with us. katie, where are we going? >> the s&p 500 is testing
9:53 am
important resistance right around 1,150. my target is 1,220, out over the long time, you could see a correction around 1,045. before you say that's really dramatic, we were actually just there in february. >> so, you think we could go down to 1,045, but then we would end up at 1,250. what is your timing when you look at that technically? >> longer term for me is six months out. i think this year we're in a much different environment than last year. obviously, then the recovery rally was nearly uninterrupted, barely had a pullback. now we're much more overbought from the long-term perspective, so i think it will be a more challenging year, marked by more correction. >> carter? >> sure. i think the reference point for all individual stocks in the markets in general is where an instrument is in relation to its january highs from which everything sold off. so, a huge correction january-february, and many, many stocks have recovered all the lost ground and moved back above
9:54 am
the january highs. and so, at this point, we're trying to key off those indices and stocks that have exceeded those highs and playing the laggers that we think will finally move above the january highs. interestingly, there are a lot of large-cap names poised precisely to pop, if you will, above their january tops, just as many small caps have already done, the russell in particular. >> is it a good sign, a bad sign or no sign at all that the riskier, smaller stocks have led the way in this rebound? >> well, it's both, truth be told. when momentum is quite brisk, people play beta, and in that sense, it shows how strong the tape is. at some point, it becomes too much of a good thing, and as you've inferred, it becomes a bad thing. at this point, not too far, and likely to be a foreshadowing of the laggers, the large-tech names, catching up, rather than a sign that we're exhausted. >> excuse me. i'm getting over a cold.
9:55 am
katie, in my notes, i don't see much sunshine between the lines here. >> right. well, sentiment is quite complacent in my work. if you look at the spread between the bulls and bears, it's back up to levels we last saw in january, and before that, not since may 2008, and before that, october 2007. so, sentiment is quite complacent out there. that does suggest that we're vulnerable to a correction, not to mention the fact that we're a year into that recovery rally. so, again, much more mature rally right here. >> and your view on this recent leadership issue of the riskier, smaller stocks, does it mean anything? >> it does mean something. i think we've gone too far too fast there, indeed, in the small and mid cap arenas, which have really broken out to new highs and have out-performed. if you look at at ratio of russell 2000 to the s&p 500, the phase of that performance is very, very steep and sharp, and
9:56 am
i don't think it's sustainable. and looking overseas, you'll notice that most developed and global, you know, emerging markets have not broken out, along with the large-cap indices domestically. >> carter, if you had to say what you were most excited about or least excited about, which would you choose to go for and tell us what it is. >> right. well, at this particular moment, the thing to be most excited about is how certain laggers are starting to anticipate. two huge names are general electric and walmart. up importantly today and have been for the most part stocks that haven't quite come to life the way russell-type names, small cap, mid cap have. it's very unlikely for the market to be in the cusp with immediate trouble with names like, again, ge and walmart, asserting themselves just here today. >> all right. we appreciate that. mark, did you hear that, ge got mentioned? >> yeah. >> it wasn't in a nasty way? >> yeah. >> enjoy it. bask in the glory. >> i'd rather bask in a higher
9:57 am
stock price. >> you've got to start somewhere. much more on financial regulation. we'll talk to republican senator richard shelby. and the impact on financials. with so much of the focus on the big banks, could you be missing opportunities in the small and mid cap banks? that's next. >> and we're going to talk about protecting your investments from the major changes coming out of washington, which by the way, raises that question. vote on our website, will any of this change the way you invest at all? we'll be back.
9:58 am
hi, ellen! hi, ellen! hi, ellen! hi, ellen! we're going on a field trip to china! wow. [ chuckles ] when i was a kid, we -- we would just go to the -- the farm. [ cow moos ] [ laughter ] no, seriously, where are you guys going? ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! [ female announcer ] the new classroom. see it. live it. share it. on the human network.
9:59 am
10:00 am
live from the financial capital of the world in the heart of lower manhattan, this is it, second hour of "squawk on the street." i'm mark haines. walmart the biggest mover on the dow, up more than 1.5% after being upgraded to buy at citigroup. on the s&p, st. jude up about 7%. on the nasdaq, amylin up 10%. 30 minutes now into the trading day, ford, pepsi and dominion resources hitting fresh 52-week
10:01 am
highs. erin? all right, mark. and you mentioned pepsi, which i know is on the list with bob pisani, because we were just talking about some of the dividend payers that were sticking out to you. >> yeah, you know what's amazing is pepsi raised dividends today 17%. they're the 71st company in the s&p 500 to raise their dividends so far this year. >> 71st. >> 71st. yes, i know, get a life, bob. i do track all this because that's what we do here. you know, it's embarrassing, but it's true. so, if you looked big p o altria is paying about 7% dividend yield. a lot of the telecom stocks held back, they haven't done anything. so verizon and at&t, they have lagged the whole mark. >> how they're huge. >> they're paying 6.5% dividend yields right now. so, there's a lot of juicy players. a lot of the telecom stocks are laing a bit and doing great. duke's paying probably 6.5% dividend yield at this point. here are some of the big dividend payers that are out. we're not going to list all of
10:02 am
them, but the point is, there are lots of companies out there that are pretty stable paying dividends for a while now. >> and as for the good news, delinquencies for credit cards improving. >> i think there's an encouraging trend. capital one not only said delinquencies were improving, but net charge-offs were improving. and bank of america and discover, their delinquency rates are getting better. charge-off rates, which are basically loans they're going to write off completely, increased a bit. so, the data is still choppy, but your key metric is delinquency, because that's a leading indicator. >> that's a indicator of the future, right. >> that's a lead indicator. i have not yet seen american express's numbers. i don't think they're out yet. this is for february. >> they usually come in the afternoon. >> yeah. we'll see what american express has to say. >> thank you very much to bob pisani. meantime, let's check in with scott wapner. >> erin, thanks so much. nasdaq's the weakest of the three major averages in early trade today. we're shy of just 0.5%, about ten points or so. weakness is coming from a few key stocks. apple is down 1.7%, semiconductor stocks, a real point of weakness. hard to find many chips this
10:03 am
morning in the green, and that's one of the reasons why you have some weakness across the board here. down 1.6% for the semiconductor index. google is down 2.5% as it spars with china over censorship. could google leave china? speculation is now heating up that that may, in fact, happen. the beneficiary of this conversation this morning is baidu. its shares, as it is the chinese version of google, shares are up. so, most big-cap technology stocks are trading lower, even the ones that aren't seeing a big decline, like apple and google, showing more modest losses, but nonetheless, they're in the red, like intel, dell, microsoft also down 0.2%. erin? >> thanks, scott. just eyeballing it here, it looks like we are at maybe very close to the low of the session for crude oil. let's check in with sharon, find out exactly where we are and why. hi, sharon. >> how are you, erin? yes, we are near the lows of the session, below $80 a barrel. and as we've seen the s&p 500
10:04 am
drop, we've seen oil prices drop as well. keep in mind that correlation continues as traders keep their eyes on what's happening with china in terms of monetary policy, the if i dfed meeting an the opec meeting on wednesday. a lot of traders and investors who may be looking for exposure to oil through some of the bigger commodity indices haven't been faring that well, have fared worse than oil prices so far this year as well as the s&p 500. when you look at what has happened to the dow jones ubs commodity index or to the goldman sachs commodity index, both have far lagged the price of crude and the s&p 500 so far this year. meanwhile, what is pressuring them? really, it has nothing to do with crude oil. it's the grains, sugar. sugar is down 33% since its peak on february 1st. rick santelli, to you in chicago. >> well, thank you, sharon. as i look at interest rates, it's pretty much categorically what we call a parallel shift on the curve, meaning no matter what maturity you look at, 2s all the way out to 30s, they're
10:05 am
each up about a basis point, yield down a bit in price. it's not a weak supply in terms of coupons, at least in regard to u.s., it's about bills, whether three-month, one-month tomorrow, 56-day on wednesday. if you look at corporate supply, which was on a terror last week, this week at least so far it doesn't seem to be as aggressive. a couple of highlights -- australia will be coming into the market. and on the corporate side, bomb brideer, about a billion. and i believe eight in ten-year maturities. the dollar is doing better, a quarter of a cent. most of the gains are against the pound. mark, back to you. >> rick santelli, thank you. while the banks seem to be out of the woods, new financial regulation could impact the overall performance. which is the better buy right now, the big banks or the regionals? joining us, david katz and craig seigenthaler, analyst at credit suisse. craig, you first, which is
10:06 am
better, big or regional? >> well, the regional banks avoid many of the regulatory issues that impact the large-cap banks. you look at the systematic risk regulator, look at the consumer protection agencies, two of the key components in the regulatory reform bill, and the regional banks have a much lower impact from both those regulations. so, if this passes, it's definitely a net positive for the regional banks here. >> but don't you have a slower rate of repair of the balance sheet going on in the smaller banks? >> well, i would argue, actually, the opposite point, because if you look at the regional banks, they're overweight c&i loans, especially small and middle market. so, these areas actually do very well when a lot of the indicators that you may look at, like business spending, capacity utilization, inventory levels start to recover, and when gdp's been positive for a couple quarters, that's kind of where we are now. so, the loan growth rate's very negative, but we see this improving as technology, automotive, other industries need more credit. >> david, what's your view?
10:07 am
>> we agree that there are regulatory headwinds for the big banks, but we think the vast majority of the problems are behind them. their loan portfolios have peaked in terms of the negative trend. they're getting better. they've all refinanced the t.a.r.p. funds. so, we think from here, they represent the best risk-reward. they have lower risk and good reward potential. and like bank of america, which is in the 17 area, we think has $3 of earnings power, can go up a whole lot higher, could be at $30. and the regional banks, we think they have a good deal of commercial real estate exposure. it's a concern for us. they all have to repay the t.a.r.p. back, or many have to repay the t.a.r.p. back. that's going to cause a dilution in their earnings power and shares outstanding, so we think the other headwinds at the regional space outweigh the regulatory benefit. >> aren't they an environment that can change overnight? i mean, look at senator dodd coming out with this plan. >> there's no question the whole situation could change overnight, and we're assuming the worst in terms of the regulatory environment and the regulations that are put in place, but we think that the big
10:08 am
banks and/or brokers or the trust processing banks, which we don't think are going to be too impacted, are going to be able to navigate around it and their stocks are simply too cheap based on the fact that they were devastated over the last year or two. >> craig, some names you like, two or three? >> fifth third's our favorite. it's a very cheap stock, trades around six times normalized earnings. when you think about the reserve levels, very high, 5% reserve-to-loan ratio. bring that down. fifth third also still has to pay back t.a.r.p., but we think this could be a positive, because the number that many investors think in terms of common equity issuance that fifth third needs, we think it could come in lower, especially if you look at the point from last week. >> david, briefly. >> bank of america, jpmorgan and then we like the processors, bank of new york and state street bank. >> all right, gentlemen, thank you very much, david and craig. appreciate your input. >> thanks. and it's time now for the "squawk on the street" daily jobs report. senate taking up a new version of that $15 billion jobs bill, and this is the bill that was
10:09 am
primarily tax breaks for companies to get through the higher. the centerpiece of the legislation is that payroll tax exemption. now, this goes back to, i believe what senators hatch and schumer were looking for, to hire people who have been out of work for 60 days. if you've been out of work for 60 days or more, you get hired, the company gets a break on your payroll tax. word is, this could pass tomorrow and go to the president's desk for his signature. next, powerful and influential senator richard shelby. >> yep. >> he's going to be with us to talk about financial reform -- oh, there he is, mark! >> oh! >> he's here. >> he's here in person. >> better clean that food up over there. >> better move my crescent. >> and then $7.3 billion of new cash flowing in u.s. equity funds recently. is this a sign the retail investor is getting in and should you get out? and we'll talk about express scripts to health care stock that's double eeferd the past year. mark is scurrying around like a
10:10 am
rabbit, cleaning up his desk for mr. shelby. we'll be back.
10:11 am
10:12 am
all right, today at 1:30 p.m. on "power lunch," pga tour commissioner tim finchem. on the list, tiger's return, the health of the tour without him
10:13 am
and a whole lot more. 1:30 eastern time today on "power lunch." in the meantime, let's bring your attention to some stocks on the move. brian shactman back at hq, he's got more in the next "realtime flash." >> hey, erin, thank you. let's talk cold beverages of the non alcoholic variety. a lot of chatter today about pepsi raising the dividend on the stock buyback, but dr. pepper, snapple also making a nice move. barron saying it could go over $40. it got a million from the pepsi bottling deal. shares up 25% year to date. goldman sachs moving radio shack today, removing it from the conviction buy list. goldman notes the recent stock run-up due to m&a speculation, although i need to point out, this name still up 170% from a year ago. finally, intercontinental exchange down about, i'd say close to 3% now, downgraded to market perform from out-perform
10:14 am
at keefe, bruyette and woods. let's go to david faber now. >> thanks, brian. let's look at a couple other deals we saw this morning. fairly large, i mean, not gigantic, mega deals by any stretch. of course, the phillips-van heusen purchase of tommy hilfiger, got a lot of press over the weekend. that was announced this morning. and we also got one we hadn't heard anything about previously, which is a $3.4 billion purchase of essentially gas rights to the marcellus shale by -- from minion resources by consol energy, symbol there cnx. they're buying about 491,000 acres in the marcellus formation. this is a coal company that is also now transforming into coal and gas. and this deal, of course, will take it a long way in doing that, making it one of the largest operators in that marcellus share. they are saying it will be accretive to earnings per share
10:15 am
as well, but the stock is down. you can see it right there. there's dominion, by the way. i'm sorry, that is fine. that's hanging in there. the buyer here, though, at that $3.475 billion number, is down -- we're going to have it for you in a minute. that would be cnx, and that is lower this morning by about 7% or 8%. and again, this is expanding their business fairly significantly and dominion's saying their decision to sell their exploration production business came as a result of a previously announced plan to monetize their marcellus acreage, and there you have a look at cnx, down 8.5% this morning, again, on this deal. it will lever up the balance sheet. interesting to note, both this deal and phillips, which i'll get to in a moment, are deals in which debt is being taken on in a fairly significant fashion by the acquiring company. bit of a change from what we would have seen even a year ago, even six months ago, in terms of the willingness of corporates to
10:16 am
take on risk to their balance sheet in effect. as for the dominion sale, after-tax proceeds will be about $2.2 billion to $2.4 billion and it will meet their needs for 2010 and 2011, helps to reduce their ongoing capital expenditures by about $200 million a year. again, that is the dominion side of that story, of that sale of the marcellus shale rights. all right, let's move on to phillips-van heusen. $3 billion in cash and stock for hilfiger, and apacs, the seller here, private equity firm to hilfiger, will continue to own a significant slug of stock. they chose to do that. they could have taken the cash, but they chose to. but here, here's a different story. now phillips-van heusen up sharply this morning, as much as 12% on this news, despite the fact that it will be levering up its own balance sheet, taking on about $2.5 billion in debt to finance the deal. now, this company has had success in the past with a
10:17 am
similar tragedy. it was only a few years back that they bought calvin klein for a fairly significant sum and did the same thing. of course, the key question here, we're seeing a return to the willingness of corporates to lever up their balance sheets. again, in this case, philli phillips-van heusen, as i said, had a lot of success buying calvin klein, levering up and then paying down that debt. the expectation here is the same. they expect in the nine months from when the deal closes may 1st to generate about $200 million in free cash flow towards paying down that debt, and then in 2011 another $300 million in free cash flow that will also go towards paying down their debt. levering, though, may be back in style. mark, back to you. >> all right, thank you, david faber. just ahead, democrats forging ahead on financial reform, republicans pushing back. senator richard shelby, ranking member of the banking committee, is on deck. >> i see that deck and how messy and sloppy it looks. i want everyone to know what i
10:18 am
tiny little space we work in. and later, express scripts. if you bought it a year ago, you doubled your money, but does that mean you could double it again? we'll talk about everyone clicking on that one a lot, so we'll talk about it and look at the dollar as we go to our short commercial before senator shelby. dollar is higher by about 0.5%. what starts out as an innocent family dinner can sometimes get out of hand in a hurry.
10:19 am
[ screaming ] hey. pbht! [ luke ] unless, of course, you've got at&t, the nation's fastest 3g network, which means you can surf the web and download videos in a snap. there you go, dad. hey. ♪ thanks. [ chuckles ] this is good. [ male announcer ] at&t. a better 3g experience. get 50% off all messaging phones after mail-in rebate, like the pantech reveal. only from at&t.
10:20 am
10:21 am
financials are trading lower, not significantly so, with the exception of citigroup, still below that key $5 level that it would need for mass mutual fund holdings. obviously, citi had a good week last week. clock is ticking. in less than four hours, democratic senator christopher dodd will be revealing his plan to overhaul wall street. republicans seem to want more time for members to study the matter. senator shelby is leading the charge on that front, ranking member of the banking committee. he joins us now here on set. senator shelby, wonderful to have you. >> thank you. >> christopher dodd has made the argument, which senator corker's
10:22 am
agreed with, that he's only got 60 days, and they need to get a bill out there and he's willing to listen to whatever you had to say, but he needs to get a bill out there now. do you agree with that or do you think he's even rushing today's announce snaent. >> well, he's the chairman and he can set the agenda, but at the end of the day, i believe to pass a bill off the floor of the senate, he's going to have to have a lot of republican help, not one, not two, but a critical mass. and senator dodd and i have talked about this on many occasions. we were talking the other day. and i believe that, although i haven't seen the bill, i think he's going to incorporate some of the ideas that we have suggested, and maybe it's the beginning of real negotiations between the democrats and republicans. but we'll have to see as the bill unfolds starting later today. >> and i know mark and i have a lot of questions on some of the specifics, but i wanted to just highlight some of the things people are bringing out today that this is going to be in the dodd proposal, get your reaction to it. one of them is this one, that
10:23 am
the new york federal reserve got too powerful, and so now, instead of having the bat board pick who's in charge -- and that person's in charge of the biggest banks in the nation -- the president will make that change. what do you think? >> i had made the suggestion to senator dodd and others on the committee that we should knock out the conflicts in choosing who's going to be the new york fed chairman. and the other reserve bank charmz. in this proposal, from what i heard this morning on tv -- and i haven't seen the language -- senator dodd is proposing that the president only appoint the new york fed chairman but not the other reserve banks. i think that we need to look at that very carefully. but i do believe that anywhere we can knock out obvious conflicts of interest, where some of the banks help choose their regulators, that i believe happens at the federal reserve bank of new york and the other reserve banks, that that should be dealt with. i know that's part of the 1913 federal reserve act. it was a compromise legislation
10:24 am
then. >> right. >> but it's obvious conflict to me. >> in a letter signed by all but one of the democrats on the committ committee, i guess this is friday, you say -- pardon me while i search for the sentence i'm looking for -- "we understand your bill will contain several provisions which will address issues that have never been subject to the committee's review or examination." what are you referring to there, so that we have a clearer view of what's at issue? >> well, i'm sure that there's always clutter. i haven't seen the bill, but -- >> neither have we. >> nobody has. but there's always things thrown in that we never had hearings on, and we want to make sure of that. i don't want to, you know, negotiate the bill on tv today, because i haven't seen it, but i can tell you this, if senator dodd and the democrats really want a substantive bill, which a lot of us want, i believe we can get it. we can work together. if they want to just push
10:25 am
politics, that's another thing. but the too big to fail and a resolution of that is something that senator warner and senator corker have really worked on. a lot of us are very concerned about that. i have worked along with senator dodd and others on the consumer finance piece, and there are a few sticking points -- derivatives, corporate governance and so forth, but we probably conceptually maybe agree on 85% or 90% of a bill. it's a question how do we move it forward. >> what about this issue of consumer protection? where do you stand on that? do we need it? and then you get into a turf war, who should do it. >> absolutely. a crucial question right now. do we need it? we're all consumers, but i don't think we need a free-standing consumer finance products division or free standing where it has its own rules, its own enforcement, because sooner or later, it's going to run into the question of safety and
10:26 am
soundness, you know, how healthy a bank is, and they could be working at odds and so forth. i propose that it be okay to be part of the fed, our fdic, but that we have a council of regulators here -- the fed, fdic, the comptroller, a state bank and so forth, to oversee this, because at the end of the day and the beginning of the day, the safety and soundness, the credit worthiness of a bank is key to the future. we're probably going to lose -- i hope we lose none, but we could lose 300, 400, 500 banks this year, so, safety and soundness is on the consumer, which is all of us' mind. >> how would you fund this issue, and this is another big issue, of who gets charged, right, this too big to fail issue? if a bank is huge -- and by the way, all of our biggest banks have gotten bigger -- if you had a failure at, let's say bank of america, let's pick it hypothetically -- how would this bill prevent that from wrecking the entire system? >> well, that's central to what we're trying to do here.
10:27 am
i believe that too big to fail is critical. that is, we should not have it. that what we're trying to do, and we haven't seen the dodd language today, but i've seen language that we've been working on, that we're trying to have a resolution authority that where nothing is too big to fail. as volcker says, if it's too big to fail, it's probably too big to exist. but i don't think being big is necessarily bad. i think being big and thinking you're going to be bailed out by the federal government, the taxpayer, is very bad. >> how would you -- >> so, what we're talking about, erin, is how do we get, you see, something like debtor in possession money. geithner, the secretary of the treasury, has one view on it. senator corker and warner and others have another. it's got to be resolved. some people believe if we set aside money, and you know, we charge the banks, the big banks, to put a pool of money in, that that is setting up too big to
10:28 am
fail in the future. what we want to do is send out the message that nothing's too big to fail. >> so, what sort of timetable, since you're concerned about the timetable, and i think everybody can understand that concern, you know, what is that old saying? act in haste or pent at leisure, something like that. >> absolutely. >> what would be an acceptable timetable for you? >> well, i don't want to put a calendar on anything. we have been dealing with this over a year now. i went to the white house in february last year with senator dodd and met with the president on this. we have had hearings. i think we basically know where we're going. it's a question how do we get there and what avenue. april's coming up in a few weeks. i don't believe you can rush this bill through. it's 1,000 to 1,200 pages. nobody's seen it yet, the proposed bill. and i hope that we can resolve this. if senator dodd and the democrats and the president wants a bill, a good bill, we
10:29 am
can work and meet him at least halfway. >> senator dodd makes a point, though, that they've spent hundreds of thousands, maybe, at least tens of thousands of hours in it in the last year. pedal meets metal, you all know where the other ones stand. he says, look, if we're going to get it done this session, not push it past midterms, you have 60 days. >> well, we've all spent, erin, thousands of hours, not just the democrats. the republicans, the republican staff, members and so forth. but you can't put a calendar on anything in washington. you can move it out of the committee. i have no doubt that democrats can move this out of the committee. the question is, can they move it off the floor? i'd say they won't be able to do that unless we reach critical mass, that is,a lot of republican help. >> senator shelby, david faber. i'm just curious, with the advantage of time now having passed since those crazy days in september and october of 2008, when you look back at some of the decisions you made, some of the decisions you saw made by treasury and the fed, do you
10:30 am
have any regrets or do you believe that we chose the right course? >> well, i -- if you look back, i opposed the bailout of the banks, the bailout of the auto companies. i've always thought that nothing was too big to fail. i have to give credit to a lot of the big banks and smaller ones, too, that have paid this money back, paid the warrants back. but still, our banking system is not in great shape. this year is going to be a trying one for a lot of banks. some of our big banks are still sick. >> do you believe, ultimately, that we would have been better off had we actually allowed things that were big to fail back then? >> i do. i think we would be better off. look at lehman. you know, nobody wants anything to fail, but everybody thought the sky would fall when lehman went under, but it didn't. and if other big banks had gone under, the sky wouldn't have fallen. it would have been dark for a few days, but this country is
10:31 am
resilient and we've got other banks that are strong and we could step in, we could save the day still. >> all right. >> all right, thank you, david. thank you, senator shelby. >> good to see you, senator, thank you. >> senator richard shelby, member of the senate banking committee. he, like the rest of us, waiting to see exactly what's in this dodd proposal that's going to be released later today. so, we're all just kind of groping around here. >> and it will be released at 2:00 eastern standard time. a very important hour. christopher dodd must have waited for "street signs." >> we have a pretty good show on at that time, don't we? i forget who's on it. >> "signs of the street," something like that. but we will be focusing on that. we have bank ceos. the announcement, senator dodd laying it out, taking questions. all of that will be on a special edition of "street signs." and please vote in the poll. >> okay, don't forget to vote in today's street poll. is the financial overhaul bill changing the way you invest?
10:32 am it's a web poll, not an e-mail poll. the results at the end of the show. and just ahead, a european debt crisis and this one doesn't have to do with a pig. this one pitting owners of one of the most recognizable sports franchises in the world against one of the world's most powerful banks. wow. two overpaid parties fighting it out. and protecting your portfolio from washington. your how-to guide minutes away. this is cnbc's "squawk on the street," first in business worldwide.
10:33 am
10:34 am
live in the financial capital of the world, this is "squawk on the street." >> got a lot of breaking news. >> let's talk india. let's talk earnings.
10:35 am
welcome back. 10:30 on the east, 7:30 on the west, coast of the united states, that is. here are the headlines we're watching. republican senator richard shelby just walking down our stairs right now just after telling us that republicans and democrats actually agree on about 85% to 90%, i believe i wrote down, of what should be in this bill. well, obviously, that last 10%, 15% could be the most important, but still. industrial production, meanwhile, rose 0.1% in february. may sound small, but it is the eighth consecutive monthly increase on that measure, an indication of perhaps a small economic improvement. and 130 american lawmakers
10:36 am
urging treasury secretary geithner to take immediate action to aggress problems with the chinese currency and label china as a currency manipulator. it's unlikely any such thing will ever happen, by the way. financial regulation moving forward, sort of. health care moving forward, sort of. there's a lot of questions for investors when it comes to washington and whether they're going to do anything and then if they do anything, whether it even matters. let's bring in farr and ferrell. let's start with you, michael farr. you know, everyone talks obsessively about this financial regulation bill, and no doubt, it should be very important, but i don't really know anybody who's made any change in their investments as a result of it. are they stupid or is the bill teethless, toothless? >> well, yeah, i don't think they're necessarily stupid because i can't figure out how you're supposed to know what they're trying to accomplish with this bill right now. we've got the government trying
10:37 am
to do a whole bunch of things right now and we're watching the classic partisanship fighting, and it seems to me that the aisle is growing wider as they kind of throw rocks back and forth over this particular bill. so, here's the deal -- the world's going to change for a lot of financial institutions. we don't know how. so, how do you value those financial institutions? we could get health care reform through this reconciliation process, which most of us don't really know how it's going to work, but we know that there are changes coming. could get jammed through. going to change the value and metrics for health care companies. so, you say, well, fine, health care companies look relatively cheap. i own some of them that i hope are going to be more defensive and defendable against some of these new regulations, but in a time of uncertainty, i think what you're seeing largely is money is staying in people's pockets and they're just not investing. >> well, you know, michael, i think in times of uncertainty, what you do is back up and go into the category killers. you don't know which way the
10:38 am
change is going to come, but when you look on the financial side that this is some sort of bill is going to change some sort of things, but you've got stocks trading at book value, some cases below back value, i am not sure the prices reflect the risks demonstrated. on the business side, you have ancillary businesses with some companies that are category killers. one of them is mamerisource bergen. you've got the baby boomers going to turn 65 next year. 95 million people are going to be requiring more health care. this is probably something trading at a very reasonable multiple and generating a lot of free cash flow that takes you out of the limelight and is probably a pretty good place to invest, especially institutional investors that want to have some participation in all segments of the market. >> i agree with vince. you look at the category killers and the most vulnerable names. the other name we might have talked about, too, was cvs. you have the front store operations, the back store, but
10:39 am
again, it's dependent on volumes increasing and the profitability, of course, increases as a lot of these generics come off patent. so, i think that's probably another good thing. vince, it's still making me crazy, though, that the most successful thing government seems to be doing right now is expanding government. >> well, they always perpetuate government, but what we've got to figure out is how do we get out of the line of fire, and i think there's lots of things that are trading at appropriate values to keep us out of that line of fire. >> banking stacks up 100%. i still think you have to be somewhat cautious. >> that's why i love farr and farrell. they don't even need the mediator moderator. thanks to both of you. wonderful to see you, as always, and a good week to you. our street poll today -- now, you've heard the farr and farrell view. is senator dodd's plan to increase financial regulation -- whatever the heck it happens to say today -- believe me, we all kind of have some feelings -- is it going to influence the way you invest at all? literally, will it change anything?, yes or no.
10:40 am
please let us know. and now the battle lines have been drawn. the future of one of the most recognizable sports brands, manchester united, hangs in the balance, involving everyone from goldman sachs to david beckham. ross is live in manchester. that shot looks wonderful because you are there and you match the background. take it away, ross. >> reporter: yeah, manchester united red. there is a battle going on for this club, not as far as the club is concerned. they say the management here says we're not for sale, and that's the end of the matter. but in reality, there are moves behind the scenes. this is one of the world's most profitable franchises. the last set of accounts, they earned around $75 million in profit, but the problem is, they've got a large amount of debt. the interest on that debt came in around $60 million, and that's the result of the tampa bay buccaneers when they bought this club back in 2005, they have continuously ramped up the debt and part of that is in kind
10:41 am
notes, meaning the interest is just being added on to the loan, and that's what's got the supporters upset, which is why the likes of david beckham are wearing scarves like these to say we are not wearing the manchester united colors. we want the glazes out. on the other side, those who are saying they want to buy it include the likes of jim o'neil, goldman sachs chief economist, paul marshall from the hedge found and keith harris, who owns an investment company in the uk. they're trying to find wealthy individuals to put up between $10 million and $30 million to try and buy this. will they get a deal done? kind of depends on whether the glazers want to sell. but they have mobile home parks that may be in trouble. malcolm glazer recently sold his home in florida. so maybe they need the cash, but it's a question of whether the two sides can meet. meanwhile, they keep pulling in the revenue. they just announced a deal with turkish airlines and malaysian telecom, but this is a fight that i think is going to run a little bit more and the characters are ones we all know fairly well.
10:42 am
back to you. >> well, thank you very much. wow. just sort of funny on many levels. ross westgate, thanks. a story a lot of people here will be following. funny how some of the same names come up with the investment banks. coming up, if you bought express scripts a year ago, you doubled your money and the stock is trading near its all time high, so, what is your next move? a lot of you are clicking on this stock on our website. that's why we have the experts at hand. and on "power lunch," michael lewis. want to remind you about this, best-selling author, prize-winner, newly minted hollywood mogul. michael lewis will talk to the "power lunch" crew about his latest book "the big short," the crisis and comeback. we have more coming up, but right below the session for crude, down about 1.70%. we are down below $80 a barrel. host: does charlie daniels play a mean fiddle? ♪ fiddle music
10:43 am
charlie:hat's how you do it son. vo: geico. 15 minutes could save you 15% or more on car insurance. national car rental knows i'm picky.
10:44 am
so, at national, i go right past the counter... and you get to choose any car in the aisle. choose any car? you cannot be serious! okay. seriously, you choose. go national. go like a pro.
10:45 am
10:46 am
welcome back. i'm jim goldman in the silicon valley bureau with the stocks making news in today's "west coast wake-up." the first weekend of apple's ipad's preorders are in the books, and there's early word that customers ordered 120,000 of them, hyper thinks the number could be closer to 200,000. 51,000 were sold in the first two hours, but by saturday and sunday, orders slowed to about 1,000 an hour. well, baucus giveth and taken away. this year's grape harvest in napa is facing a serious threat. the california department of agriculture has quarantined 162 square miles in napa after discovering the european grapevine moth. this could be a serious threat to the nearly $3 billion state grapevine harvest. james cameron isn't the only one reaping "avatar's" rewards. news corp will reportedly earn $140 million from the film when
10:47 am
it hits pay-per-view and dvd. and "alice in wonderland" has taken in $430 million worldwide. that's not a bad couple weeks for director tim burton and the folks at disney. that's your west coast waky waky. erin, back to you. all right, express scripts trading near 52-week highs, doing twice as better than the overall market over the past year. the company provides a range of services to pharmacies around the country. and it is one of the most clicked stocks on our website, here to tell us why he would take a second look is steven halfor of thomas weisel partners. good to have you with us. just because something goes up doesn't mean it could keep going up. it has doubled in value, at a one-year high. you still think it could go up? >> yeah, hi, good morning. yes, express scripts, we have it rated overweight at the firm. it's our single best idea for 2010. we think underlying fundamentals
10:48 am
this year are extremely strong, and as we look out over the next three to four years, we're looking at bottom-line growth of at least 20% to 25%. so, we continue to believe the stock is overvalued -- undervalued, i apologize, and we have $115 target price. >> what was it in the conference call, because after the conference call, you said you've become incrementally more confident. what was it in that call that made you so? >> sure. one of the things that the company is working on right now is the integration of the net rx acquisition that they completed at the end of last year. they spent about $4.7 billion to acquire the pbm business from we wellpoint. the company identified $1 billion of incremental ebitda, which it would be able to realize. the company's on track to realize that, closer to 12 months as opposed to 18 months that they had previously
10:49 am
indicated. therefore, we have a higher confidence level in our earnings estimates for this year and next. >> who competes with them, and is there another way to play this or not? >> sure. express scripts is one of the big three pharmacy benefit managers in the u.s. their two largest competitors are medco health, ticker mhs, as well as cvs caremark, ticker's cvs. again, the pbm industry is dominated by these three players. there are two smaller players in the market, which compete for a smaller managed care and employer groups. that would be sxc's solutions as well as catalyst health, but it's really the could use their clout and dominate the industry. >> and express is the highest of the three in your book? >> yeah. if i had to rate the three, we
10:50 am
would pull out express scripts. they do have ternings leverage coming through from the net rx acquisition this year. then all three pbms should benefit from 50 or $60 billion of new generic drugs coming to market which they'll be able to make more gross profit on. >> all right. thanks very much, steven. >> thank you. can you believe it's already time, mark? >> it is, indeed. six in 60 coming up. >> in 60. and go vote on our street poll. will the financial reg plan change anything about where you put your money? before our break -- >> trish regan. >> great to see you guys. happy monday. coming up at the top of the hour, aig wants to reduce its bonus pool by 30%. but we're going to be talking to the lawyer of some of these employees that say they were contractually entitled to these bonuses. so is what aig doing really
10:51 am
fair? the lawyer says he may sue. we'll have all the details and the drama for you on that one. plus, for the first time since 1980s social security is scheduled to be paying out more money than it actually has. we're going to debate whether or not an easy fix would be to simply raise the retirement age. all that plus the latest market news and action right here from the floor of the exchange coming up for you at the top of the hour on "the call."
10:52 am
10:53 am
10:54 am
in today's "street poll" we asked is the democratic bill to overhaul wall street changing the way you invest? 48% of you said yes. 52% said no. i'd call that a draw. >> i'm actually surprised there were so many yeses. >> yes. so am i. >> actually change where your money is because of that already? time for "6 in 60." erin gets three. i get three. nike. sirona dental systems upgraded to buy from neutral.
10:55 am
pnc financial downgraded to neutral. the firm saying the stock relatively near the target, challenges in the short term are significant. >> chesapeake energy downgraded to equal weight from a buy from morsen stanley. they say it's a valuation call. equal weight means it moves with the market. radio shack. goldman, you need to change your ratings. if it's a buy but not a conviction buy, what the heck is that? in all honesty that is a little bit ridiculous. dreamworks animation downgraded from neutral to buy. the firm citing valuation for the downgrade there. i mean, really, mark. >> i agree. >> i'm not trying to be a jerk or be silly here. i mean, if you say buy you mean buy. >> i agree. >> yeah. >> it's like, oh, we're a little pregnant. you're either pregnant or you're not. you're either going to buy it or not. >> i bet you that their argument is going to be something like,
10:56 am
well, a buy means it's going to go up to x percent and a conviction buy means even more than that. but to the regular person to have it make sense, a buy should be a buy. >> yeah. >> a sell should be a sell. because they do the same thing on the sells. they have a sell and they have a conviction sell. >> yes. i know they do. >> mm-hmm. >> let's say you have a conviction buy and a regular buy. >> yes. >> what does that mean about the regular buy? then it's a wishy washy buy? >> it's probably only going to go up -- i don't know what their percentage is. it's not going to go up as much as a conviction buy. mark would like to rename the goldman list. conviction buy and wishy washy guy. >> i think you ought to be convicted if you follow their advice on buying. we have a very big "street signs" today. we are eager about this. this is going to be christopher dodd announcing his plan with all the reaction you need to know. that is the event of the day. we'll have it live at 2:00 eastern. in the meantime -- "the call" is next. see you tomorrow.
10:57 am
hi, ellen! hi, ellen! hi, ellen! hi, ellen! we're going on a field trip to china! wow. [ chuckles ] when i was a kid, we -- we would just go to the -- the farm. [ cow moos ] [ laughter ] no, seriously, where are you guys going? ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! ni hao! ni hao!
10:58 am
ni hao! ni hao! ni hao! ni hao! [ female announcer ] the new classroom. see it. live it. share it. on the human network. cisco.
10:59 am
good morning. welcome to "the call," everyone. i'm trish regan live at the new york stock exchange. we're 90 minutes into trading. we're watching stocks trade in yet again a very tight range here. there are some


info Stream Only

Uploaded by TV Archive on